The Union Goal Is To Make Firing More Difficult

Matthew Yglesias on what should be common sense:

…the idea that labor union objections to firing their members are fundamentally about evaluation metrics is extraordinarily naive. Under any possible evaluation scheme—whether for teachers, journalists, auto workers, basketball players, truck drivers, or what have you—the union is going to want to make it as difficult as possible to fire people. The idea of a labor union is to, among other things, represent the workforce’s interests and give voice to its desires. And in my experience people don’t want to get fired! In any kind of unionized workplace you see management pushing for more flexibility (i.e., ability to fire people) and the union pushing for more job securitiy (i.e., it’s easier to keep your job even if management decides you’re bad at it). 

34 Responses to “The Union Goal Is To Make Firing More Difficult”


  • I think it’s more accurate to say that unions work to maintain a two tiered system of benefits for workers, Union and non-Union, with the majority of benefits accruing to the Union. And a large portion of the benefits are related to job security.

  • Not a big surprise. This is another core failure of Capitalism. On Capitalism workers fear efficiency and technological advancement. If the company next year can do more with less that means someone will lose their job. Workers prefer inefficiency and resist technological advancement.

    This is one of the reasons our economic growth has slowed so much as we have shifted towards neoliberalism to some degree. Resistance to efficiency is intensified when the social safety net is weakened. People know that when they lose their jobs they are really going to suffer. That’s one of the reasons economies with a good safety net grow their economies more quickly. People don’t fear efficiency gains as much, so they more readily accept removal from a job and re-training.

    Latin America over the last 10 years has been growing quickly. They’ve taken some pretty sharp turns leftward. I think it’s been called the “pink tide”. Lula in Brazil, Morales in Bolivia, Ecuador, Argentina. Some speculate that with the US distracted to the Middle East since 9-11 we have been unable to focus on blocking democracy to the south. Chavez probably would be gone if not for 9-11. The greater tendency towards Socialism means workers enjoy the benefits of efficiency gains, rather then the minority class of non-worker owners (stock holders). When workers get to share in the improvements things go better.

  • Dude, take the most socialist of Latin America, noticeably absent in your list: Venezuela, its doing horrible. Take the most right-wing, Mexico – electing, for the first time in 71 years, the right-wing PAN party – and Mexico is doing great (even better than the supposed “leftist Brazil”, see here) – this, despite their war on drugs.

    So your storyline isn’t so simple. Personally, I think all of this has more to do with China’s rising middle class than any policies on the ground (unless of course, they are so egregious they drive investors out, see Venezuela). But it’s understandable for you to think otherwise, probably hard to put all these nuances in a youtube video. ;-)

  • You and I have disagreed in the past about what has happened in Venezuela, so you should acknowledge that rather than just stating as fact that it’s doing horrible.

    http://hispanicpundit.com/2012/05/02/food-shortages-in-venezuela/

    The reason I didn’t use Venezuela is because I know you wouldn’t share my starting point that things are doing better there. I’ve not seen you say the same about the leftist regimes in Brazil and Argentina, so I used them.

    As far as Mexico, stock market performance has very little to do with success in my mind. Investors like Mexico. Maybe. That doesn’t mean much to ordinary people. Yeah, the 1% cares, but the world is bigger than the wealthiest 1%. If the 1% double their wealth (and get no happier doing it) but the bottom 99% is flat or slightly declined, is that success in your mind?

  • If you go to your other thread on Venezuela it’s not that they are doing horrible. It’s that they’ve had success, but Chavez doesn’t deserve the credit. It’s more about the rise in oil prices. Though there are some failures. Well, which is it? Are they doing horrible or are they doing OK but Chavez doesn’t get credit?

  • But you’ve kind of sidestepped the main point. Workers should be expected to fear efficiency gains on capitalism. That’s the way the incentive structure is set up. So in the end I agree with you. Unions aren’t interested in evaluation metrics and eliminating poor performers. Why should they be? On capitalism. On socialism, sure, they’d want efficiency. But not on capitalism.

  • Jon, you write: I’ve not seen you say the same about the leftist regimes in Brazil and Argentina, so I used them.

    I dont even grant that these countries are necessarily leftists. They have policies I agree with and ones I don’t, on net it’s a complicated question.

    You write: As far as Mexico, stock market performance has very little to do with success in my mind. Investors like Mexico. Maybe. That doesn’t mean much to ordinary people.

    Okay – then how about Human Development Index? Mexico’s is higher than Brazil’s, see here.

  • It’s not about what a country is presently like but how it is changing. In 1960 S Korea would have looked terrible on the Human Development Index, but at the time they were implementing policies that meant they were getting better. Other countries at the time might have been better at the moment, but heading in the wrong direction. The issue is how they are changing, not where they presently are.

    Anyway, I’m curious for your thoughts on the incentives within capitalism. What is the effect of improved efficiency in capitalism? Great for the non-working owners. More profits. The worker though doesn’t share in that profit increase. He puts himself at risk of being unemployed. And on the more free market version of capitalism that unemployment is very painful. Limited welfare expenditures if the right wing has their way. So the worker should fear efficiency, and naturally resists it. In fact the incentives are that he surround himself with incompetent people, because when layoffs come he’s insulated.

    Or just consider costs. Where is the incentive for workers to concern themselves with cost overruns? They are paid wages, which are not tied to profits for the most part. They don’t really care. So management has to stay on top of these issues, but they don’t care too much either because mostly they are paid wages. What you need is internal motivation. Workers interested in efficiency. But it’s not built into the incentive structure.

    Socialism is totally different. Worker pay is based on profit/worker. So the worker doesn’t need to have a manager watching like a hawk to make sure he doesn’t waste. He wants to reduce waste because that’s his pay.

    Does that make sense to you? Yeah, workers/unions aren’t interested in performance metrics. On capitalism. That’s the nature of capitalism.

  • By almost any metric, Brazil is comparable to Mexico – that is my point. Yet Mexico has had, for the first time in 71 years, a right-wing government.

    This tells me that what is happening to Latin America as a whole – including Mexico, is deeper than low level on the ground politics. China’s rising middle class, is probably the biggest factor.

    Quick replies to your economic questions, as I dont want to get dragged into an endless economic lesson with you that ends up going nowhere.

    You ask: What is the effect of improved efficiency in capitalism?

    Greater efficiency = better standard of living for all. This isn’t really that hard to understand. If you can make more lemonade from fewer lemons, more people get fed.

    You write: And on the more free market version of capitalism that unemployment is very painful. Limited welfare expenditures if the right wing has their way.

    Not true. On the more free market version of capitalism you also have dramatically more competition. Competition is the source of all job security. More competition means more demand for workers, means higher wages.etc

  • into an endless economic lesson with you that ends up going nowhere

    Oh come on, professor. Help a novice out.

    Greater efficiency = better standard of living for all. This isn’t really that hard to understand. If you can make more lemonade from fewer lemons, more people get fed.

    Well, that sounds easy enough. Can we assume that the rising unemployment won’t cause a reduction in demand for lemonade? You need money to buy lemonade, right? People earn money through wages or via an ownership claim. Most people get money from wages. If they now have fewer job opportunities, what is the effect on demand for lemonade?

    More for all is what you seem to think. Why would the owner increase production when so many people now lack money to purchase lemonade? Maybe the rich owners will drink more. They have the money. They’ll have to consume more to provide the demand that leads to jobs. Will they endlessly consume more and more lemonade on a daily basis. Going from a glass a day to a quart, to a gallon, to two gallons, and onward forever? There are some unanswered questions here, professor.

    More with less sounds good. But what if the “more” is going to a tiny minority. It’s not a “better standard of living for all” if the “more” goes to the few that don’t need it. If the workers shared in efficiency gains via profits, then sure, more with less is good. But what you haven’t seem to grasped though I’ve told you three or four times now, is that the benefit accrues primarily to the owner on capitalism and is shared on socialism. If you don’t agree, fine. But at least reply rather than responding as if you are unaware that I’ve already written this 3 times.

    Not true. On the more free market version of capitalism you also have dramatically more competition. Competition is the source of all job security. More competition means more demand for workers, means higher wages.etc

    My claim is that the right wing wants to reduce welfare and unemployment expenditures and this will have the effect of causing more pain for people that lose their jobs. Are you disagreeing with that?

  • The relationship between greater efficiency and unemployment is loose. Think of technological innovation. Clearly a good thing, based on both of our views. Does it cause unemployment? Sometimes, but it also creates employment too. The net affect is dependent on many things, not necessarily on raw technology/efficiency.

    This, fundamentally, breaks your house of cards. Like I said, “more with less”, is better – no matter how you look at it. Even if I grant your hypothetical (the rich will simply bogart the excess lemonade), it’s still better. After all, it’s better for them – and they count for something too.

    You write: My claim is that the right wing wants to reduce welfare and unemployment expenditures and this will have the effect of causing more pain for people that lose their jobs. Are you disagreeing with that?

    Yes and no. The right-wing, myself included, certainly wants to reduce welfare and unemployment expenditures…and to a degree, yes this will have the first order effect of causing more immediate pain for people that lose their jobs. But there are two responses to this “yes”:

    First, while this may cause immediate pain, there is a good argument to be made that in the long run, this reduces poverty (see here and here for good intros on this argument).

    Second, this also has to go hand in hand with the view that the right-wing also wants to increase competition – which helps increase wages, jobs, and reduce immediate and long term suffering.

    You write: But what you haven’t seem to grasped though I’ve told you three or four times now, is that the benefit accrues primarily to the owner on capitalism and is shared on socialism. If you don’t agree, fine.

    Yes, Jon, in your classroom experiment where you and your little socialists friends get together on youtube videos and dream of a world vastly different than ours, dream up these utopian views that have no basis with real world situations, it may very well add up to something better. But there is a reason why few people, and certainly not the economic profession, takes socialism seriously anymore.

  • …and I have went round and round with you on these issues. Basically we get to the same dead end every time…in the end, I have to value my time too.

    But you can post all you want in the comments. I like my readers to see your side. Which is why I quote you in full sometimes. :-)

  • Like I said, “more with less”, is better – no matter how you look at it.

    I’m glad you state it like this, because in my view this is absolutely wrong. Under some conditions more with less is not better.

    Let me give you a scenario. You can think it’s unrealistic, but that doesn’t matter. What is important is that you understand that under some conditions more with less could be worse.

    Let’s say tomorrow suddenly we can do the same amount of work with half the people. Also tomorrow let’s just say we have zero welfare state. A lot of people lose their jobs. Here’s the kicker, which I’m asking you to accept just as a hypothetical even if you think it is unrealistic. Let’s suppose production does not change because all the demands of those with money are being met. Don’t need to make more iPods or flat screen TV’s because those that can afford them already have them and don’t want more even as prices fall (in other words assume the demand curve is almost flat).

    Under those conditions when people can’t purchase food if they don’t have money and don’t have jobs because demand is too low (in fact demand is probably falling further since now half the population has no income, so we see further layoffs coming) “more with less” is not better. These people don’t have land, so they can’t farm. Even if they did they may not know how to. People are now starving and eating each other.

    On capitalism you don’t produce for need. You produce for exchange. When goods and services are not dispersed based on need, but instead are disbursed only via ownership claims and wages, and at the same time you have many people that can’t earn via either method, you have many people in really bad shape.

    I would rather not produce “more with less” under those conditions, because that will mean that people will go without. I like more with less generally. I would prefer it if we distributed to some degree based on need. But on my hypothetical we aren’t doing that, and so things are bad.

    And I would suggest this is not a hypothetical. This is exactly what is happening all over the world, such as Haiti. Capitalism doesn’t care that Haitians are starving. If you don’t own the factory or you don’t have a job you get no money. And there’s no safety net. So you starve. This is capitalism today. It’s already happening. And as the sweatshop factory gets more efficient Hanes can fire more. And they own the land, so people can’t grow rice or pigs. They get nothing. And the misery is off the scale.

    But there is a reason why few people, and certainly not the economic profession, takes socialism seriously anymore.

    I know you like to think of yourself as the professor and me as the ignorant novice, but it’s been too many times that you’ve told us what the economics profession thinks and been shown to be wrong. You don’t even know what the right wing thinks. I have had to show you in the past. You need more humility, less discussion about me personally (I’m a waste of your time) and you need to broaden your reading list a lot. Have you even read Marx? How about any detailed critique of capitalism? Tell us what books you’ve read on this?

    Am I ignorant? Yep. But so are you. You just don’t know it. And I don’t need to dodge the argument and instead focus on the fact that you are ignorant. If I didn’t want to engage in the debate and thought you were too ignorant for it I’d just stay silent. What’s the point of repeating the notion that you are ignorant over and over? We get the message. I’m ignorant. I know it. You’re ignorant and you don’t know it. That’s fine. I don’t mind. But to bring every discussion back to that same point seems a bigger waste of time than actually discussing the issues.

  • You seem to be saying that the gains from capitalist innovations would tend to accrue only to the wealthiest. It might be theoretically possible, but empirically it just hasn’t happened. Yes the wealthy get wealthier in capitalist systems, but so does everyone else. This is empirically supported from the beginnings of capitalism in the Netherlands in the early 18th century and in England slightly later, through the US and continuing, starting from the 70′s in China and beyond. If you think that it isn’t because of capitalism, but because of unions, the here is D. McCloskey’s take on that

    “Workers in the United States and elsewhere grew radically better off from 1800 on, and 1900 on, and even from 1970 on because of the Bourgeois Deal, not because they went down and joined the union. How do I know? Answer: the nonunion people share nearly equally in the gain, even though they were paying as consumers for the fancier wages for union electricians in Michigan. The maximum of 14 percent of “concessions” extracted by bargaining or strike doesn’t come close to accounting for the great magnitude of rise in the real wage. There’s not enough profit – usually 10 or 15 percent of national income – to raise the level of the rest of national income by a factor of even two, that is 100 percent, much less the factor of eighteen it in fact rose after 1800.”

    In other words, showing that unions didn’t get us to the level of living that we enjoy is a matter of accounting. I haven’t seen any good evidence that unions allocate more money to workers rather than owners, although you may have some references.

    Since you care more about happiness than wages anyway, you might be more interested to know that union labor tends to be less happy than non-union labor. It is a fairly robust finding too, over professions, people, countries. My source is a teaching company lecture 22 of Modern Economic Issues.

  • Jon,

    You write: Let’s say tomorrow suddenly we can do the same amount of work with half the people. …A lot of people lose their jobs. Here’s the kicker, which I’m asking you to accept just as a hypothetical even if you think it is unrealistic. Let’s suppose production does not change because all the demands of those with money are being met. 

    This is ridiculous Jon. You are dragging me into an endless utopian discussion again. The stuff you write doesn’t make sense.  Your hypothetical’s are not just unlikely, they are impossible. The same amount of work with half the people now working? Production does not change with a large increase in unemployment? These are impossibilities, not just unlikely.

    Look, you can discuss class room theoretical’s where 2 somehow equals 3, or  what an economy would look like if somehow human beings had telepathic abilities all you want if it interests you. But you can’t expect other people to share the same interest. I like dealing with realities on the ground, not hypotheticals on a chalk board – or a youtube video.

    Lastly, you write:I know you like to think of yourself as the professor and me as the ignorant novice, but it’s been too many times that you’ve told us what the economics profession thinks and been shown to be wrong.

    Click here for an example of that. Where you think the profession is disagreeing with me, but really, you just didn’t understand the point (either mine, or what the profession is saying, or both), but I am sure you walked away thinking otherwise.

    Finally, for readers more interested in our Haiti disagreements, please read these (see here, here and here) previous discussions Jon and I had on the topic. This was when I was much more patient and hopeful that our discussions would go somewhere. I have since learned. Please read the posts, you will understand why.

  • DF

    Yes the wealthy get wealthier in capitalist systems, but so does everyone else.

    Well I think we all agree that Haiti is capitalist, right? Everyone gets wealthier in SOME capitalist systems and not others. As you know I side with Ha-Joon Chang in “Bad Samaritans” as he explains that the differences between these various capitalist societies are the key to explaining why the rising tide lifts all boats in some cases and not others. I’m not denying that it CAN happen, and has happened rapidly in some capitalist societies. I actually think capitalism done right is more likely to produce rapid egalitarian growth than socialism.

    I’d be very interested to hear that info on happiness and unions. Can you share?

    HP, I think sometimes we get to a point where we are pissed at each other and barely trying to understand each other. Obviously I don’t think a society where people are eating each other is a utopia.

    But instead of being a jerk about it I’ll just say that I know what you mean. You mean the situation is not realistic, not that it’s a utopia. As I explained I don’t think it’s totally unrealistic. Wouldn’t happen in a day, but over time it does happen, as in Haiti where unemployment is between 50 and 75%. But even if it was unrealistic you know very well that unrealistic scenarios are common in economics discussions. You are well read enough to know that. You just gave me an analogy from Friedman about using spoons instead of shovels to dig. Not likely to be executed in the real world, but it illustrates the point. I addressed the larger point rather than sidestepping the question by talking about how this would never happen.

    Given that you know that analogies can be unrealistic and still illustrate a point and given that you are rebuffing me as I try to do the same, it seems to me maybe you’re too annoyed or whatever and not really hearing me, so we’ll just end this here.

  • I would say that virtually no one who isn’t trying to pin blame on capitalism would call Haiti capitalist. Yes, they have low de jure tariffs, but that isn’t the only, or even the primary feature of capitalism. The respect for private property, as well as institutional structures for resolving disputes, and markets are all as important, if not more so. McCloskey, a libertarian who lives in Sweden, has stated that Sweden does capitalism properly. Other libertarians have made the same claim. What I’m saying here is that it isn’t enough to look at some numbers and claim that a country is capitalist.

    I don’t know if I still have the lecture. It was on my computer before I had to rewipe it. If I can find it, I’ll get it to you.

  • Jon,

    You write: Well I think we all agree that Haiti is capitalist, right?

    This is one of those points where we have to define terms. Haiti is capitalist only in so much as the owners own the means of production. But that’s it. On metrics where economists would say are requirements for a successful economy, Haiti does very poorly. See here.

    You write, Obviously I don’t think a society where people are eating each other is a utopia.

    When I wrote utopia, I was referring to your ultimate goal of comparing capitalism to socialism. Socialism, in your view, is closer to utopia than capitalism. But I grant the context of using utopia in my response could be misleading.

    You write: As I explained I don’t think it’s totally unrealistic. Wouldn’t happen in a day, but over time it does happen, as in Haiti where unemployment is between 50 and 75%.

    Let me be clear, I dont think that it’s unrealistic to have an unemployment rate of 50%, or even 75%. You didn’t just say that. You said, and I am quoting:” Let’s say tomorrow suddenly we can do the same amount of work with half the people… Let’s suppose production does not change because all the demands of those with money are being met.”

    Your argument isn’t just that we get 50% unemployment. Your argument is that we get 50% unemployment and production stays the same…and the same needs are met. This is unrealistic. Impossible even.

  • On my understanding capitalism has 3 core features.

    1-Means of production are owned privately, as in investors.
    2-Money is earned in two ways. Wages and ownership titles (like rent).
    3-Exchanges occur in a market where prices are set. Prices are not set by a government board.

    On my understanding it’s not a matter of 100% adherence to these conditions. Workers could own a company within a capitalist society. Workers could be paid according to profits rather than wages. Governments can via regulation certainly do things that affect prices. But if these three conditions are the predominant conditions of a society that society is capitalist.

    Deviation from it is not a hard line in the sand. It’s a transition.

    So take S Korea. Heavy government regulation which affected prices. But prices were still set in the market. The means of production is owned by the investors, but the government did intervene. Workers are paid from wages. Owners are paid from investment income insofar as they are paid dividends, but paid wages in so far as they work. S Korea is capitalist.

    As far as I know what I’m saying is standard. What is China today? Capitalist. Means of production are owned privately and workers are paid wages. Prices are set in the market with some government intervention, but not as in the Soviet Union. I don’t claim to speak for all economists, but I think this is how the terms are understood generally.

    On this understanding Haiti is capitalist. Private property is very much respected. This is why the factories are owned by investors, not workers. Workers are paid wages. Profits go to investors. This is the core of capitalism, as distinguished from socialism where the workers own and control the means of production and are not paid wages, but are paid in virtue of profits they earn as workers or generally by democratic agreement within the company (workers are the only voters).

    Sweden is capitalist too. Pretty much the whole world is capitalist. Cuba and N Korea are the two that come to my mind that are not.

    On metrics where economists would say are requirements for a successful economy, Haiti does very poorly. See here.

    No doubt Haiti does not have a successful economy. But success and capitalism are not one and the same.

    This is unrealistic. Impossible even.

    Seems impossible to me that large groups of people would use spoons to dig, but since I was interested in grasping the larger point this was OK for me. If you don’t want to understand my point that is your choice.

  • I’ll let Darf answer the capitalist question in more detail, my only point here is that while Haiti is capitalist in the technical sense, it does not fulfill the requirements economists have of what makes a capitalist economy successful.

    You write: No doubt Haiti does not have a successful economy. But success and capitalism are not one and the same.

    You are missing my point. I am arguing that Haiti does not have the ingredients necessary for a successful economy. See the IMF report here. It is not arguing that Haiti is not successful (though we all agree that it isn’t), it is arguing that the ingredients – overall, “ease of doing business index” – of success is quite low.

    You write: Seems impossible to me that large groups of people would use spoons to dig, but since I was interested in grasping the larger point this was OK for me. If you don’t want to understand my point that is your choice.

    Why does this seem impossible to you? Does it also seem impossible to you that large groups of people would use shovels as well, instead of machines? Gross inefficiencies in order to preserve jobs is a common characteristic of unions.

    Just to give one example, my dad has worked for a union for 20+ years (he is forced to do so, where he works you have to be union) and he was telling me of how a ship with merchandise entered the dock at 15 passed noon. These are ships carrying millions of dollars of merchandise. Every second counts. When these ships come in, basically everybody gets endless overtime to unload the ship as quickly as possible. But in this one instance, the guy operating the forklift was on his lunch break. Nobody, not even my dad, who was a forklift operator for years, could substitute for him during his lunch break. This was the current fork lift operators job and since he was on a lunch break, the WHOLE port was on hold.

    This guy basically just sat there, patiently eating his lunch, until 12:30pm. Then started his job, knowing that everybody else couldn’t work because he was on his lunch break…and nobody could step in, as it was not part of their current job.Union logic at its finest.

    I have no doubt that if competition allowed unions to work with spoons, they would…to save jobs.

    But here is my point. I am not saying that the same productivity with now 50% less of a workforce is a rare event. I am saying it is IMPOSSIBLE. It can’t happen. Atleast in my scenario, it physically can.

    You can’t suddenly take half a countries workforce and not have an affect on productivity. Or have the same amount of needs met. It’s impossible.

    It would be like asking me to help you solve a math problem but you want to add in the caveat that now 2 equals 3.

    The analogies between yours and mine are fundamentally different. Mine may be unrealistic, but possible…yours is just plain impossible.

  • If the three points were all that were required for capitalism then many feudal societies would be considered capitalist, and medieval Europe is not considered capitalist. The Freedom indexes are another way to try to characterize the “capitalistismness” of a country (I know you don’t accept the conclusions, but they are using another way to “define” capitalism).

    Given the difficulty of defining capitalism, and the fact that the entire world is capitalist it’s probably more helpful to talk about specific policies rather than broadly talk about capitalism and socialism. You seem to be conflating socialism and unions, which is confusing to me.

  • HP, I think you fall into a debate strategy that is not unlike what Chomsky discusses when he refers to “support our troops.”

    http://bigwhiteogre.blogspot.com/2012/09/chomsky-on-support-our-troops.html

    The technique is that you frame the debate such that the core differences are not addressed. Make it appear that your side is the side that advocates “Ease of doing business.” Online databases for easy information sharing. Ability for entrepreneurs to initiate a desired field of work without pointless hassle, bribery, etc. You dismiss the core disagreement (ownership of the means of production) as if it’s a side show. Oh sure, they may follow capitalist property relations. But where is their online file sharing? As if the socialist opposes online file sharing. You don’t want to meet me on the field of ideas and address where our real disagreement is. You want to pretend the disagreement is about something nobody denies. That makes for an easy victory.

    Darf, I think the same thing is happening when you talk about respect for private property. The core disagreement between the socialist and the capitalist is about who owns the factory. I watched a movie about Aristide and you see the fences around the factories, the armed guards watching employees as they enter. They work very hard to make sure that investors retain control of the factory. I’m unaware of any cases of workers gaining control of the factory and threatening capitalist property relations in Haiti. I had this notion in mind when I shared this image on my blog:

    http://bigwhiteogre.blogspot.com/2012/02/machinery-of-freedom-private-property.html

    What HP’s ease of doing business does is it asks whether a state has online tracking for property ownership. Haiti is weak on this so they are weak on private property. This is totally unrelated to the disagreements on property that exist between socialists and capitalists. Socialists aren’t recommending poor tracking of which investors or owners own what. They are recommending that workers only own factories.

    Everybody agrees that if you build a residence, make a sandwich, or use a toothbrush we don’t want to see others just walk up and take those things away from you. That’s why on the right the discussion is framed such that opposition to private property means I should be allowed to take your toothbrush. Not true. Opposition to private property within the capitalist/socialist debate means I oppose the notion that people make money not by working, but by owning. It’s about control of the means of production, not possessions. I don’t know if that’s what you are thinking when you say Haiti doesn’t respect private property, since naturally any poor society will have more theft, or if you mean something else, but if that is what you mean I think that’s a misconception perpetuated by the capitalists to confuse the issue so that the real disagreement is not addressed. If the disagreement is about your toothbrush then everyone agrees, and so now the socialist must be wrong.

  • Let me share a quote from a book I read called “Against Capitalism” by David Schweikart, which was EXTREMELY helpful to me in allowing me to understand what capitalism and socialism were. I used to kind of have the notion that capitalism meant free trade, low regulation, little government involvement, etc. So I kind of thought of Europe as socialist and the US as capitalist, though tending towards socialism.

    But after reading this book and further study I think differently. A good way to think about it is to recognize that Keynes and FDR acted so as to PRESERVE CAPITALISM. Capitalism means that there is a certain minority class that makes the bulk of the money not by working, but by owning. Who likes that arrangement? Naturally those owners do. In the 30′s it got so bad though that FDR was basically told by the rich and powerful “Throw the poor a bone or the whole system may come down.” The system that enriches them while they don’t work. So a capitalist can institute welfare state measures to placate the poor in order to prevent total meltdown of the system that makes the capitalist rich while he doesn’t work. The alternative is socialism, which means that the people that actually do the work get to keep what they produce. That’s the worst possible thing for the capitalist, so he’s willing to take a little less rather than get nothing.

    Anyway, I’m quoting just the definition of capitalism from Schweikart, which is the basis of his ensuing critique.

    “Before beginning, some words about the key term. What is this “capitalism” we shall be interrogating? Let us understand capitalism to be a socioeconomic system characterized by three features. First, the means of production are, for the most part, privately owned, either by individuals directly or through the mediation of corporations. Second, the bulk of economic activity is directed toward the production of goods and services for sale on a free market – “Free market” meaning that prices are determined largely by supply and demand, without government interference. Third, labor power is a commodity. That is, a larger percentage of the work force sells its capacity to labor to those who can provide it with tools, raw materials, and a place to work.

    To be capitalist a society must feature all three sets of institutions: private property, a free market, and wage labor. Many past societies, as well as current ones have exhibited one or two of these characteristics, but not all three. For example, a feudal society consisting of self sufficient estates worked by serfs had private property but neither a free market nor wage labor. A society of small farmers and artisans (colonial New England, say) is not capitalist, for despite the presence of private property and a market, there is little wage labor. On the other hand, all Western industrial nations today are capitalist. The presence of an elaborate welfare apparatus, a number of nationalized industries, or a ruling party labeled as “socialist” does not render a society non capitalist. So long as the bulk of its enterprises are privately owned, are worked by hired, labor, and produce goods for sale at largely unregulated prices, a society is capitalist.”

  • I’d like to know when the US became capitalist then. More than half the population lived outside of cities until early in the twentieth century. Does this mean that the US turned capitalist 1920? Wage labor was less common in the US because wages were higher relative to the price of land earlier in the history of the country, but there weren’t barriers to it. Even in Britain, the birth place of the the industrial revolution and in a sense the birthplace of capitalism, a majority of the population was rural until the middle of the 19th century. That would indicate that most of the population wasn’t wage labor.

    As far as who benefits, the average income in Britain doubled from 1780 to 1860 even as the population doubled. The benefits weren’t restricted to the owner class either. I think Marx acknowledge that consumers benefited. Anyway, the point that McCloskey makes is the important one. Unions can’t account for the increase in the standard of living in what are traditionally considered “capitalist” countries (the US, Britain, the rest of Western Europe, Japan), literally. The benefits that Unions extract can be measured, and they don’t account for the rise in the standards of living.

  • Not sure on when the US became capitalist. I Googled it and my first hit is this one which says the US became capitalist around 1900, so that aligns with what you are saying.

    http://www.newhistory.org/CH01.htm

    And I also agree that capitalism doesn’t have to be a system where the benefits accrue predominantly to the owners. I think S Korea is a case in point. Also the US, particularly from WWII onward to 1980. Productivity gains and median income tracked during this time period. Since then productivity has continued to rise but the gains to the median family have slowed dramatically. They still accrue to the wealthy.

    So complaining that unions resist efficiency seems to me a lot like complaining that Muslim terrorists exist. When you create the conditions that give them incentives to exist it’s only natural that they exist. If you want to stop it you need to consider the causes. When you create conditions where workers are punished with efficiency gains, you can complain about it if you like, but you are the one advocating the policies that lead to this.

    Norway is a capitalist country, but I wouldn’t expect as much pressure there on workers to resist efficiency. They have a pretty strong welfare state. Public health care. If they improve efficiency and this leads to termination of employment they probably wouldn’t like it, but they won’t fear it like an American would (and should).

  • I don’t think that anyone was complaining that unions reduce efficiency, just observing. You can understand how people would be sceptical that unions benefit society at large given that their goals are often to reduce the efficiency that has facilitated the improvements in living standards.

    It’s a strange definition of capitalism that excludes the era of robber barons and trusts in the US and the satanic mills in Britain. In any case there the gains to the population in the US and Britain advanced relatively steadily from the industrial revolution to now.

  • I think the assumption that efficiency should be the primary goal is an assumption that should be questioned. If I have to choose between more efficient with a lot of starvation and less efficient with less starvation I take less efficient.

    As I understand it an individual can function as a capitalist even if the majority of the population doesn’t function that way. So you can say that the society as a whole is not capitalist, but the robber baron is. I think the definition of capitalism I’m using is standard.

    For me this was a very eye opening thing. I used to think capitalism was the greatest, and I thought use of force to protect it could make sense, such as in Vietnam. I could see myself marching off to war not really knowing what it was the Vietnamese were objecting to. Not really knowing what I’m fighting for, though thinking I know. I’m fighting for Haitian conditions in Vietnam. Owners getting the money while not working. Workers getting wages which the owners use their influence to reduce. The Vietnamese are fighting to control their own lives, their own factories, their own resources, rather then subjecting them to the control of a non-working ownership class. They know what capitalism is. I would have been thinking of capitalism as freedom to engage in exchanges, freedom for someone to set up a lemonade stand if they want, online databases for easy information sharing. As if the Vietnamese were resisting this. My misconception, which I say you and HP both have, is not an accident. It is very beneficial for the super wealthy to send others off to war to protect their right to control what other people do with their factories and resources. I vigorously defended capitalism without knowing what it was, and I think that’s what you are doing now.

  • The primary characteristics of capitalism that you site would stand as a working definition, but that the US and Britain were both capitalist from the start of the industrial revolution also has to be recognized, and it also has to be recognized that capitalism has virtually eliminated starvation in those countries where it is practiced. There just isn’t starvation in capitalist countries. This summer was one of the worst droughts in many years in the US. I didn’t even notice significant price increases at the grocery store. That can’t be said for socialist/communist regimes. And to claim that owners get the money without working ignores the fact that many (most? virtually all?) owners work very hard, and more importantly that the standard of living of the average person in the US and most of Europe is a factor of ten richer than the average person 200 years ago. Capitalism has made us rich.

  • There just isn’t starvation in capitalist countries.

    Haiti, India, and China are all capitalist countries. I don’t know how you can say this.

    And to claim that owners get the money without working ignores the fact that many (most? virtually all?) owners work very hard

    Mitt Romney doesn’t work at all for his income. And he’s not just living off the income he generated in the past. He gets dividends from the companies he owns. He gets the profits. They do the work. If he died work would go on as before. He adds zero in terms of productive contributions. But he gets the largest share of the money. So his nest egg probably gets larger with each passing year even though he spends a lot. Now, when he can sleep all year long and productive activity doesn’t change a bit, how does it make sense to say he works very hard?

    Some owners make money by means of an ownership claim AND ALSO they work. That’s what we do, since we have 401k’s and also jobs. But though I may own Apple stock I contribute zero to the development of the product, and yet I still get dividends from them. Of course it’s nothing for me, but for the big owners it’s tons of money. For doing nothing but possessing stock. You can think it’s right that it works this way, but you can’t say that these stock holders are working hard. If they die tomorrow and we don’t find out for a year nothing changes. They do nothing.

    Yes, capitalism has made the people of some nations rich. I continue to agree with this point you are making. I’m not sure if you continue to say this because you think I wouldn’t agree, but I do agree.

  • When you claim that Haiti, India and China are all capitalist countries it makes me think that we aren’t even talking about the same thing. We’ve discussed Haiti (and disagree). China started making baby steps towards capitalism in the late ’70s as a result of famines (and it did, and has, improved life immensely), and India just started becoming (slightly) capitalist in the early ’90s.

    Mitt Romney worked for his income. He took part of his compensation in the form of ownership of shares. This is a form of deferred compensation. And yes he probably did work very hard for it. You speculate that owners do nothing, but you tend not to introduce any data showing that owners don’t work hard, you just speculate. I doubt that you or I have the talents or the energy to achieve that kind of money, whether it be in cash, stocks, mutual funds, or jelly beans.

    If you think about it, your complaints that he does nothing apply equally well to pensioners and retirees. They aren’t working and yet they are being paid. If they die tomorrow nothing would change. That seems to be a pretty narrow view of the world. It also ignores the informational aspects of ownership, buying and selling bring to a market economy, but that would take us too far afield.

    The point that capitalism has made many rich is meant to illustrate the stark difference between it and other systems. No other system, whether it be socialism, communism, or feudalism has pulled such a broad swath of people out of poverty. Capitalism has worked, and nothing else has. A more productive exchange might be discussing what aspects of capitalism actually do help lift people out of poverty, and what aspects of capitalism does not. Because no other system has worked.

  • Yes, we are definitely talking about different things if you are saying Haiti isn’t capitalist and I’m saying it is. When you say capitalist, what do you mean? Keep in mind that I think we both agree S Korea was and is capitalist.

    With Romney we’re again talking about two different things. I’m not talking about money he earned AS A WORKER. I’m talking strictly about money earned AS AN OWNER. He has earned money in both ways. Just for mental purposes set the money he earned in two piles. One pile is what he earned while working. Let’s say he draws from that pile later in life. OK, the person has worked for that.

    But the other pile collects the dividends and interest that result from the first pile. You can like that arrangement if you like, but it’s not like it’s hard work to collect it. On socialism you cannot collect money in this way, but on capitalism you do.

    Yep, that’s true of retirees. It’s not hard work to collect interest for retirees either. If they died nothing would change. Doesn’t make it right or wrong, but it’s not hard.

    BTW, are you familiar with the kind of work Romney did to earn his millions? Take the case of KB Toys. He borrows $330 million from banks and uses that along with $18 million of his own money to acquire a controlling stake. Who services the interest on that loan? Not Romney. KB Toys does. Then Romney demands that they take out $66 million in loans to pay him “consulting fees” which they do. Here’s what his consultations amounted to. Fire all kinds of people, give them no severance, tell everyone else their pay is reduced and they must work longer hours with greater intensity.

    So now he’s got his $66 million, more than tripling his initial investment. What he’s done is take a struggling company and load them up with debt and interest payments on the order of tens of millions per year. This is what he brings. In their case they collapsed. Dunkin Donuts was the same situation on a much larger scale. They are still alive, though struggling. They have to sell 2 million cups of coffee per month to service the interest Bain stuck them with. Now, it might have involved a lot of work. But rewarding that kind of work is like rewarding a terrorist. It doesn’t matter that it was hard for OBL to work out his attacks. His work was destructive.

    You say socialism has failed. I suppose you think the Soviet Union was socialist, but I don’t agree with that. I think the closest thing to socialism today is Cuba. It’s tough there of course. Major violence is perpetuated against them stemming from the world’s most powerful country to the north. Also the embargo. Despite that they are one of the best places to live in the region. People all retire pretty early, excellent literacy rates, excellent infant mortality rates. Their health care system is far and away the best in the region per the WHO rankings, and this is reflected in their excellent life expectancy, much better than their capitalist neighbors. They are pretty much identical to the US as far as I remember in that regard.

    So as I look at it it seems the best place to live in the area is socialist. The scariest, worse places are Guatemala, Haiti, Nicaragua. All capitalist. In fact they had capitalism imposed on them by force. You probably don’t think these places are capitalist, so you’ll have to tell me what you mean by the term capitalist.

  • Romneys ownership was given to him because of work that he did. You can pile it any way you’d like, but the money he continues to generate was given to him for work. It’s the same as pensioners, they have an agreement to be given a certain lump of money after they have stopped working. Ownership of a company is more volatile than pension payouts, and in Romneys case it’s much larger, but in principle there isn’t any difference. They’ve earned it from working. I understand that socialist systems don’t allow that, but I consider that a bug, not a feature. I haven’t looked into Romneys moneymaking much, but I doubt that you understand it that well either. He was, from what I understand, in the business of rescuing failing companies. You can claim that some of these companies would have thrived without Bain, but I doubt it. The business side of it is complicated, and I don’t think you know enough or have enough interest to say one way or the other.

    Lenin, Stalin and Trotsky were all evolutionary developments of marxism. Mao set up a communist system in China. India copied quite a bit of the Soviet model, including 5 year plans. That’s three examples of large failed socialist experiments.

    You’ve said that the entire world has embraced capitalism with the exception of N. Korea and Cuba. That doesn’t leave any room for successful socialist success stories. Keep in mind, too, that poverty doesn’t need to be explained. Until 200 years ago life in the entire world was nasty, brutish and short, everyone was poor with the exception of the aristocracy. Some countries escaped that, none of them were socialist.

  • but I doubt that you understand it that well either…I don’t think you know enough or have enough interest to say one way or the other.”

    You’re moving away from the arguments and starting to discuss me personally and I take that as the cue that says this discussion is at an end. So just as a final thought let me say that I really don’t think you know what my view is. You make repeated statements that I agree with, like that capitalism has rapidly taken people out of poverty as if I dispute that. Now it’s that Romney’s ownership titles are the result of work he did as if I dispute that. Instead of addressing the questions I asked you, like what is capitalism, you’re speculating about whether I think KB Toys could have survived without Bain and saying that I don’t have enough information to know, as if I dispute that. You tell me I leave little room for successful socialist countries as if I claimed there are many examples of successful socialist countries. It’s like you’re arguing with me, but it’s all stuff I agree with, so I just have to assume you have a very mistaken notion of what I think and what I advocate.

  • When you start to make analogies between Mitt Romney and Osama bin Laden you might not understand the situation as well as you think you do.

    You say “So as I look at it it seems the best place to live in the area is socialist. ” and also “Pretty much the whole world is capitalist. Cuba and N Korea are the two that come to my mind that are not”. I don’t know how to square these two statements. Unless you think that the best place to live is Cuba or N. Korea, and I’m pretty sure you don’t believe that.

    I’ve avoided answering the “what is capitalism?” question because it is too broad, open ended, and complicated. In addition to the economic and legal systems, there is a social understanding that respects private property and innovation. I think it’s generally more helpful to discuss various aspects of capitalism as generally understood (free trade, freedom of exchange, whether or not unions have increased general welfare…) than to just say that capitalism or socialism.

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